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What effect would error have on cost of goods sold

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Amsterdam Hospital Supply Corporation reported using the LIFO inventory method. Its inventory amount was P 490.5 million.

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Question a. Suppose that during the period covered by this report, the company made an error that understated its inventory by P 15 million. What effect would this error have on cost of goods sold and gross margin of the period? On cost of goods sold and gross margin of the following period? On total gross margin on both periods combined?

Question b. When Amsterdam Hospital Supply reported the above amount for inventory, prices were rising. Would FIFO or LIFO have shown a higher gross margin? Why?

Question 3. Glen Retail Store has a beginning inventory of P 200,000 at cost and P 400,000 at retail. Purchases were P 1,200,000 at cost and P 2,100,000 at retail. Sales were P 2,000,000. How much is ending inventory at cost and at retail?

Question 4. King's Beginning inventory was P 350,000, purchases were P 1,460,000 and sales totaled to P 2,400,000. With a normal gross margin rate of 35 percent, how much is ending inventory?

Reference no: EM132554963

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